<p>Tuition covers only a small fraction of the costs that universities spend on providing services to their students. Faculty, staff, facilities, administration, and all the academic / research expenses, it adds up very quickly.</p>
<p>Strictly from an investment perspective, double-digit returns cannot be “expected” and you shouldn’t assume anything beyond the expansion rate of the equity markets, which historically has been 6-8% per year. And there are down years averaged in there. To take much more than 5% out each year risks having the real growth rate dip below inflation, meaning shrink. And university budgets and expenditures do not go down, it’s not something like Citigroup who can just lay off 20,000 people. There is a lot of risk involved in that. I would not consider taking substantially more than 5% off each year (aside from one-off expenditures like the new campus) to be financially prudent.</p>